 The Younger Members Convention  Life With New Regulations Colin J Weir

Contents n Prudential Regulation n What it means for Actuaries n What it means for Products

Contents? n Prudential Regulation? n What it means for Actuaries? n What it means for Products?

Contents? n Prudential Regulation? n What it means for Actuaries? n What it means for Products?

Contents? n Prudential Regulation? nWhere have we been? nWhere are we going? nHow are we getting there? n What it means for Actuaries? n What it means for Products?

Contents? n Prudential Regulation? nWhere have we been? nWhere are we going? nHow are we getting there? n What it means for Actuaries? n What it means for Products?

Prudential Regulation – where have we been? n 3 rd Life Directive n Prudent Reserves n Resilience Test n Formulaic Solvency Margin

Financial Services Authority Single Regulator for Financial Services Industry n Maintaining confidence in the UK financial system. We n Promoting public understanding of the financial system. n Securing the right degree of protection for consumers. Helping to reduce financial crime.

Prudential Regulation – where are we going? n Level Playing Field n Basle Committee on Banking Regulation nPillar 1: Quantitative Regime nPillar 2: Supervisory Oversight nPillar 3: Disclosure

Prudential Regulation – how are we getting there? Integrated Prudential Sourcebook n Risk Based Capital nIdentify nAssess nMonitor nControl nMarket Risk nCredit Risk nLiquidity Risk nInsurance Risk nGroup Risk nOperational Risk

Prudential Regulation – how are we getting there? Consultations n CP97: Integrated Prudential Sourcebook (PSB) n CP128: Liquidity Risk n CP136: Individual Capital Adequacy Standard (ICAS) and Supplementary Capital Assessment (SCA) n CP140: Systems and Controls (SYSC section of PSB) n CP142: Operational Risk n CP143: CP97 version 2

Contents? n Prudential Regulation? nWhere have we been? nWhere are we going? nHow are we getting there? n What it means for Actuaries? n What it means for Products?

Contents? n Prudential Regulation nWhere have we been? nWhere are we going? nHow are we getting there? n What it means for Actuaries? n What it means for Products?

Contents? n Prudential Regulation nPrudent Margins nWhere are we going? nHow are we getting there? n What it means for Actuaries? n What it means for Products?

Contents? n Prudential Regulation nPrudent Margins nSophisticated Models of risk nHow are we getting there? n What it means for Actuaries? n What it means for Products?

Contents? n Prudential Regulation nPrudent Margins nSophisticated Models of risk nConsultation on PSB n What it means for Actuaries? n What it means for Products?

Contents? n Prudential Regulation nPrudent Margins nSophisticated Models of risk nConsultation on PSB n What it means for Actuaries? n What it means for Products?

Contents? n Prudential Regulation nPrudent Margins nSophisticated Models of risk nConsultation on PSB n What it means for Actuaries? nSkills and Work nAccountability n What it means for Products?

What it means for Actuaries – Skills and Work n Sophisticated models of… n … greater variety of risks n Clear documentation of processes… n … the board and the FSA n Accountability…?

FSA With Profits Review “Future Role of actuaries in the governance of Life Insurers” n “Actuarial Function” – Approved Person Regime n Board to be responsible for mathematical reserves n Board to produce FCR, available to FSA n Appointed Actuary to advise on ‘discretion’ with regard to With Profits business n Abolition of Appointed Actuary Role for non profit business

FSA With Profits Review With Profits n Principles and Practices of Financial Management n With Profits Fund Committee n Appointed actuary to advise on ‘discretion’ with regard to WP business n Fairness

FSA With Profits Review Fairness n “Fairness has not been exhaustively defined by the courts and continues to be a flexible concept. However, the essence of ‘fairness’ draws on common elements of natural justice, ethics and morality” n “Dependent on the circumstances of the case” n “Can change over time, as circumstances, knowledge and expectations change” n “Often easier to judge with hindsight” n “Not necessarily a one-sided concept”

Contents? n Prudential Regulation nPrudent Margins nSophisticated Models of risk nConsultation on PSB n What it means for Actuaries? nSkills and Work nAccountability n What it means for Products?

Contents? n Prudential Regulation nPrudent Margins nSophisticated Models of risk nConsultation on PSB n What it means for Actuaries nMore technical actuarial work nAccountability through the board n What it means for Products?

Contents? n Prudential Regulation nPrudent Margins nSophisticated Models of risk nConsultation on PSB n What it means for Actuaries nMore technical actuarial work nAccountability through the board n What it means for Products?

Product Reviews n FSA With Profits Review n Tiner and Baird n Sandler n Pickering n Inland revenue and Pensions Simplification?

Contents n Prudential Regulation n What it means for Actuaries n What it means for Products nScrutiny nSimplification (Products) nSophistication (Solvency)

 The Younger Members Convention  Life With New Regulations Colin J Weir